Foreign LLC to Buy Notes in Texas?

5 Replies

I'm about to start buying notes, and I have read that it's best to do that as an LLC for personal liability protection. I live in TX, but the liens will be from various states. Would it be in my best interest to register as a foreign LLC in Texas?

@Laura McPhail
It is truly personal preference. I know investors who will open LLC’s in Nevada or other states for confidentiality purposes. In Texas if you register there you can do what’s called a series LLC which you should check out.

I registered in my state of residence (Virginia) because this is where I work out of. A company you can talk to is Laughlin associates who assist in setting up LLC’s if you want to get more info

I personally have never seen the need to use a LLC to buy and be a note holder.. as liablity does not warrent the expense and book keeping.. other than making it a little harder for those that send direct mail to beneficiaries i see no need personally.. ... Now most of our clients that are in the performing note space use the SIDRA's to buy notes so the beneficial interest does need to be in the name of the Sidra but for just straight cash.. at least in my 4 decades in the note business I have never had a legal issue..

I suppose maybe if your planning on NPN and then reality will dictate your going to end up owning houses.. then that might be a smarter move to own the houses in the LLC once you have forclosed.. but again not necessary good insurance is all you need in that instance when you become the landlord or owner.

If you form your LLC in Texas, but are buying outside of Texas, then Texas is not where you register as a foreign LLC. Foreign LLC registration, if necessary, would be done in the states where you are buying the notes (i.e. where your LLC is considered foreign to). Registration in Texas would happen as part of the LLC formation process.

Hi @Laura McPhail for notes you don't need to register as a foreign entity in any state since a note is personal property and not real property (real estate). If you foreclose on the home and keep it in your portfolio, THEN you would register with the state in which the property is located.

Bob